Global factors in capital flows and credit growth | vox

Consistent with the idea that loose monetary policy can be translated across borders and that the Japanese half-hearted attempt at quantitative easing was at least partially responsible for the global financial crisis by spreading Japanese money across the globe (through the carry trade).

"In a recent paper (Bruno and Shin 2012a) we examine the theoretical and empirical basis for global liquidity. Schematically, global liquidity propagates as shown in Figure 1. When global banks apply more lenient conditions on local banks in supplying wholesale funding, the local banks transmit the more lenient conditions to their borrowers through greater availability of local credit. In this way, global liquidity is transmitted through the interactions of global and local banks through the waxing and waning of bank risk-taking."

Valenina Bruno and Hyun Song Shin take a look in Global factors in capital flows and credit growth | vox.  Is there a link between the global carry trade and the transmission of liquidity.  Can the waxing and waning  of the carry identify increased global financial risk?